Broadband News

Fergus Ewing asks for Scotland's share of USO fund

The war of words between Westminster and parts of the Scottish Government continue and the Universal Service Obligation is firmly in the headlights of the Rural economy secretary Fergus Ewing.

Mr Ewing is trying to extract a promise from the Culture Secretary Matt Hancock that the USO will tie in with the R100 project and that Scotland will receive its fair share of the USO fund.

There are some realities that make this difficult or impossible to achieve without actually causing a lot more work, for example the USO should come into effect on 1st January 2020 and the R100 is currently slated for completion by 31st December 2021, so there is potential for people in Scotland to be within scope of the USO but still be in the R100 plans. This is not unique to Scotland, other areas of the UK with their less powerful councils will likely still have superfast roll-outs going on in 2020. Additionally the R100 and other BDUK inspired projects are led by public money and large contracts that are unsuited to intervening for those 3 homes in a central Glasgow street without access to the 10/1 USO minimum and the broadband USO is designed to be funded and run by industry and if Ofcom implement it right should give alternate operators a growth opportunity and not just those large enough to win massive tenders.

A core principle of any levy or tax is that if lots of people contribute then the burden for any individual is not too big but the benefit for those the money provides help for is significant. If an exemption for the industry levy is granted to Scotland then every other elected body with plans for 100% superfast coverage will also be seeking an exemption for their area.

While no sum has been mentioned for the USO levy, if it was for example 50p per month from the millions of existing broadband connections and if Scotland had 2,500,000 connections paying in that would amount to £15 million a year, a massive amount for an individual if dumped in their bank account, but the R100 project has an initial budget of £600 million for delivering superfast broadband to around 176,000 premises (number should decrease as 2018 progresses) giving a per property budget of £3,400.

To put the scale of the money being spent on the R100 project into perspective if a similar level of spending had took place on the BDUK scheme we would be talking of a £19 billion BDUK scheme rather than arguing over the spending that is in the £1 billion to £1.7 billion. There are also hints that the R100 £600 million may not be the total or even reach an absolute 100% figure.

While Scotland and the bulk of the rural areas missing out on superfast broadband speeds are very remote if the R100 does not deliver the majority of its connections via full fibre it will have wasted a once in a century sum of money to achieve that aim.

The press coverage around these statements is always a little odd and how the broadband USO works is often slightly twisted, e.g. the idea that Westminster will deliver 10 Mbps to 100% of premises. Westminster delivered the legislation and direction for the USO but implementation has been handed off to Ofcom and success will very much depend on how the broadband industry reacts in terms of offering solutions that meet the criteria. The hope we are certain from Westminster and Ofcom is that while a minimum of 10 Mbps down and 1 Mbps is set, that lots of connections delivered will have simple upgrades to faster speeds or even the basic service will more than exceed the minimum level and tick the superfast box at the same time.

For avoidance of doubt, the broadband USO is not going to be a roll-out programme, it is an on-demand scheme, so individuals or groups of people who have sub USO standard broadband can demand their USO or better connection, how and who people request this via is what we do not know and neither do we know what penalties may exist if all the broadband industry ignores or fails to meet a request.

Comments

Who do OfCom and Government consult on how these things are set up ? Do they talk to people like yourself who have proper understanding of what is needed and more importantly , do they take any notice ?

  • pipcoo
  • 8 months ago

The comparison between R100 and BDUK is not a fair one. There are far more remote rural locations in Scotland than in the rest of the UK. This is one reason why the Scottish Government has put, proportionally, a larger amount of money in. The other reason is that we don't have a neo-liberal administration that prefers to leave things to market forces.

  • andrum992
  • 8 months ago

On the consultations, we don't usually have time to sit down and write the long papers that others submit, simply not the resources to respond to all the consultations and queries. The effort goes into the summaries in the news and maintaining the https://labs.thinkbroadband.com/local system.

  • andrew
  • thinkbroadband staff
  • 8 months ago

The R100 and BDUK comparison may not be directly fair, but it does illustrate quickly the difference in funding levels and that past reports that the final few percent are going to be costly to reach with decent superfast connectivity was going to be expensive.

Some BDUK projects are hitting the project limit of £1,750 gap funding when delivering FTTP i.e. the money from gainshare elements is delivering less premises for each pound than the roll-out did at its peak.

  • andrew
  • thinkbroadband staff
  • 8 months ago

To be honest I am surprised that telecoms is reserved to Westminster in the first place. If as I suspect telecoms is *NOT* reserved to Westminster but is in fact a devolved power then USO is not effective in Scotland in the first place.

However it is likely that the ISP's will be blanket collecting any USO levy which will included Scottish customers. As such the Scottish government is dam right in demanding that either said money is either *NOT* collected to is forwarded to the R100 program. Anything else is utterly unacceptable.

  • jabuzzard
  • 8 months ago

Scotland will already have been a disproportionate beneficiary of the existing telecoms USO due to the more rural nature of its network. I suspect the SNP wouldn't want that principle to be compromised.

Perhaps the fairest policy would be to disaggregate any industry cross-subsidy for telecoms and, like water, have regulated wholesale prices worked out in more regional terms. In this case, it could be split be devolved areas (with England being de-facto under the Westminster umbrella). The levies/cross-subsidy and USO could then be localised.

  • TheEulerID
  • 8 months ago

@jabuzzard so are you saying that any USO monies collected in Scotland should stay in Scotland and be ringfenced? If so, then surely any taxes collected in Scotland should also be ringfenced? And by implication any taxes collected in England should stay in England? I thought this was a single country where taxes were collected and distributed as required across the country rather than just where collected? Presumably taxes collected in London should stay in London, etc, etc?

  • ian72
  • 8 months ago

The Barnett funding formula already allocates Scotland proportionally more funding per capita than England with Northern Ireland even more. One reason of course being the dispersed nature of their populations. However if further funds are required then that has to be a matter for the Scottish Government.

  • MCM999
  • 8 months ago

Scotland and the SE of England are the only regions of the UK that are tax positive; that is taxed raised is greater than tax spend. So devils advocate is that would be fine by me, and I voted no.

However this is not a tax it is a levy, and is not going through the Consolidated Fund afaik. Further there is likely NO benefit to Scottish internet users from the levy, which is the legitimate objection. Basically the UK government has overstepped the mark and the Scottish government is justly pointing that out and seeking restitution.

  • jabuzzard
  • 8 months ago

Hi Broadband Watchers.
By the time it the USO is introduced in law there will not be many Post Codes that will be showing orange (10) on TBB in the SE of England so they will not be very happy if the have to pay on their service.

  • Blackmamba
  • 8 months ago

@jabuzzard

I've no idea where you get your stats from, but the only three parts of the UK that were tax.spend positive in 2015/16 according to the ONS were the East of England (just) the South East of England and London (massively). Note that the ONS allocated Oil tax revenues by two methodologies, one via the geographic share attributable to each region, the other per capita. It did not change the big picture.

https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/countryandregionalpublicsectorfinances/2015to2016

  • TheEulerID
  • 8 months ago

@jabuzzard "Further there is likely NO benefit to Scottish internet users from the levy". There is no benefit to a very large percentage of the UK - but even the many of us over 10Mbps that won't benefit we will still have to pay if it goes ahead in that form. Essentially what you are saying is that anyone who doesn't benefit shouldn't pay in which case only those with less than 10Mbps would pay for it. Scotland always wants special treatment - this is supposed to be a single country but Scotland want to be separate from and part of the UK at the same time depending on what best benefits it.

  • ian72
  • 8 months ago

@theEulerID you have to take the stats on tax with a pinch of salt, for example, the UK's biggest food and drink export, whisky, which in 2017 earned £139 every second for the UK, is deemed to be English since that is where the exports are shipped from. So according to the official stats, Scotland doesn't really contribute £139 every second but England does. English whisky isn't that well known and regarded as far as I am aware.

And @jabuzzard telecoms is very much reserved.

  • domhnall20
  • 8 months ago

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